Higher One may not be the best choice for banking, critics say

Higher One Holdings Inc., a provider of technology and payment services to colleges and universities, gives students more options for loan disbursements and checking accounts than were previously offered, the company says. Some students and personal financiers, however, say better options exist.

Southern Oregon University and other colleges offload the financial aid disbursement and refund process, along with related financial bookkeeping, to Higher One. The schools save money and resources, as administrators are no longer involved in issuing paper checks or providing loan disbursement-related customer service to students.

But students can potentially pay more in fees to manage their disbursement funds if they choose to use Higher One’s OneAccount, said Joseph Audette, vice president of education and financial literacy at NerdWallet.com, a for-profit online personal finance search site.

“Higher One is a convenient solution for school administrators to outsource financial aid reimbursement, but for students, there are better solutions out there,” he said.

Audette said that PerkStreet Financial, an FDIC insured online checking account, is a better option for students. As long as students complete one transaction each month, no monthly fee is charged, according PerkStreet’s website. But if a month passes without a transaction, a $4.50 inactivity fee is charged. Higher One, on the other hand, has no monthly inactivity fee.

Higher One does have an abandoned account fee of $19 per month after nine months of inactivity, though. But Higher One warns students via email when that nine-month marker is approaching, according to Higher One spokespeople.

Another difference between the two online accounts: PerkStreet charges $2 for out-of-network ATM transactions, but there are a dozen surcharge-free ATMs in Ashland, including in Omar’s and 7-11, a stone’s throw from campus. Higher One, by comparison, charges $2.50 for such ATM transactions and has two surcharge-free ATMs, both of which are located on campus.

Both online accounts, according to their respective websites, can be used for free if students are careful and know what actions incur fees.

Higher One and SOU say that students choose where their money goes and how it is spent, not them.

“[SOU] does use Higher One as our institution for disbursement, but it’s up to the student on how they choose to use that,” said Brian Kinsey, associate director of Enrollment Services at SOU.

Students can open a OneAccount and have their refund directly deposited into it, or they can do one of two other options: have it deposited into a personal bank account of their choosing or ask for a paper check. If a student does not specify which option he or she wants, Higher One will send a paper check to the address that that student has on file, Kinsey explained.

Higher One cites these options as beneficial to students. “The Higher One OneAccount is a great option for students, and it’s only one option,” said Lauren Perry, Higher One’s client relations specialist.

Higher One may be the only option for students who have bad credit or a troubled banking history as the company does not do background checks, Perry said. “We accept any student who wants to open an account,” she added.

In addition to providing more options for students, Higher One offers to students free financial literacy podcasts, webcasts and blog posts on their One for Your Money blog, Perry said.

SOU student Matt Pettinger, an economy and finance major, chose not to open a OneAccount. “I came to SOU as a 33-year-old and was more established than the average 18-year-old. I could tell it wasn’t the best deal for me,” he said.

Pettinger said that the fees didn’t bother him because Higher One is providing a unique service to the university and to students. But he expressed concern over SOU’s choosing to use Higher One cards as Student IDs.

“If the university is going to almost give Higher One the whole market share, by putting Higher One on student ID cards, then there needs to be full disclosure,” Pittenger said. “Personally, ideally, I think they should be two separate cards — but that’s the university’s call,” he added.

Not all higher education institutions choose to combine student IDs with Higher One debit cards, but SOU is among the minority that has, said Higher One spokeswoman Shoba Lemoine.